Solar panel glut leading to more cost effective installations globally

The glut has not only significantly diluted the impact of Trump’s tariffs but has also led to solar panel makers consolidating and expanding their market footprints through volume rather than margins.

In recent weeks, the steep decline in the prices of solar modules have effectively offset the impact of the Trump Administration’s 30% tariff hike on imported panels, said Tom Werner, CEO of SunPower Corp.

Although the price decline trims the profit margins of the manufacturers, it is nevertheless a welcome sign since they could retain if not expand the solar market by volume, rather than margins. Similarly, consumers are also benefited.

“If you are building a large power plant your pricing has certainly come back at least halfway to what it was pre-tariff if not all the way,” said Werner. “It’s muting the impact of tariffs.”

Ever since China announced its incentives for solar power on June 1, 2018, the prices of solar panel module have dropped by around 12%, globally. This has led to an oversupply of panels that had been intended for installation in China, the world’s biggest solar market.

Incidentally, San Jose, California-based SunPower is both a manufacturer of solar panels as well as an installer of solar power systems. The company primarily produces its panels in Mexico and in the Philippines; it is seeking an exclusion from the U.S. tariffs.

At an investor conference, Werner told analysts that SunPower, maker of high-efficiency premium-priced panels, was “responding” to the price declines and would not allow its premium to expand.

SunPower is in the process of acquiring SolarWorld Americas, its rival, so as to expand its domestic production in Oregon to further reduce the impact of the tariffs.

Declining prices “makes domestic manufacturing that much more challenging,” said Werner, while adding that SunPower was committed to closing its deal to acquire SolarWorld. “We’re going to have to increase scale to compete”.

The company expects to spend $51 million on tariffs in the second half of 2018 towards scaling up its U.S. manufacturing and for next-generation technology, said Werner on a conference call with analysts.

Significantly, the company has reported a lower than expected second quarter loss with revenues beating analysts’ estimates thanks to the implementation of cost controls and the strength of its rooftop solar business.

SunPower said it would start manufacturing its next-generation technology later in 2018.

With the news reaching the market, SunPower’s shares rose by 4.8% to $7.22 in after-hours trading.